Codinal theory - consumer choice concernin utility, Macroeconomics

Ordinal Theory:

A Short Note In ordinal approach, utility is measured ordinally i.e., qualitatively (not numerically or quantitatively). Alternatively, consumer can rank her preferences according to the order she wants to compare but not in terms of the different amount. It's a qualitative measure and therefore more realistic measurement of utility or satisfaction. There are two different approaches of ordinal theory, viz.,

1) Indifference curve approach 

2) Revealed preference approach 

Indifference Curve Approach:

Indifference curve is constructed by taking utility level constant, so different indifference curves imply  different level of utility for same consumer. The equilibrium is achieved when indifference curve become tangent to the budget line. 

Revealed Preference Approach:  In revealed preference approach, consumer equilibrium can be found by ranking different bundle of goods in the commodity space. Given the budget constraint, consumer chooses the best bundle for which her utility will maximise. This theory was originally constructed by the famous economist Paul. A. Samuelson.  

Posted Date: 10/26/2012 2:21:54 AM | Location : United States

Related Discussions:- Codinal theory - consumer choice concernin utility, Assignment Help, Ask Question on Codinal theory - consumer choice concernin utility, Get Answer, Expert's Help, Codinal theory - consumer choice concernin utility Discussions

Write discussion on Codinal theory - consumer choice concernin utility
Your posts are moderated
Related Questions
What are long run and short run? Long run: It is the time period wherein all inputs cannot be fixed. Short run: It is the time period within which at least one in

Q. Demand for money and GDP? The demand for money also relies on the GDP as GDP is closely associated to national income. If you choose to hold a fixed proportion of your wealt

The director of admissions at Kinuza University in Nova Scotia estimated the distribution of student admissions for the fall semester on the basis of past experience. What is the e

1. Kuhn - Tucker Conditions  Max 2x + 3y  s.t. pxX + pyY ≤ M. x ≥ 0, y ≥ 0 2. Max (8 + x)(8 + y)  s.t. pxX + pyY ≤ M. x ≥ 0, y ≥ 0 Utility function 3. U(x, y)

what is a wage? and the difference between real and nominal wages giving examples?

Derive the conditions for steady state in the Solow model. What are its implications? In what respects is the golden rule different from the steady state?

what are the objectives of the determinants of investments

Explain the Exchange rate system in western world The most common exchange rate system in western world during previous century was the fixed exchange rate system. Up to 1930s,

You decide to buy a home for $1,000,000. You approach two banks for financing. The first requires a 10% down payment and requires monthly payments on a 20 year mortgage sufficient